Chinese smartphone maker Xiaomi is joining the electric vehicle gold rush, pledging to pour $10bn into building a smart car over the next decade.
The Beijing-based company said on Tuesday that it would put in Rmb10bn ($1.5bn) to its initial phase of investment, without specifying a time period.
The push makes Xiaomi the latest tech company to join the stampede into electric vehicles, with search giant Baidu earlier this year announcing it would launch a new marque with carmaker Geely, and US tech group Apple reportedly considering a similar move.
Xiaomi did not disclose details such as whether the company would be launching a new brand or outsourcing manufacturing to a third party. According to a Reuters report last week that cited sources, the group would work with private Chinese carmaker Great Wall Motors to build the cars.
Xiaomi is one of the world’s largest phonemakers and works with partners to produce a wide range of internet-connected devices, from rice cookers to scooters. But the push into electric cars will be its most ambitious project yet.
“Traditional automakers don’t have the same legacy advantages in making electric cars so it makes sense for highly efficient internet companies who can push software updates to come in and give it a try,” said Yale Zhang, founder of consultancy Automotive Foresight in Shanghai.
Zhang said demand for electric vehicles at the high and low ends of the market was very strong at present.
The Hongguang Mini EV, a $4,500 car manufactured by private automaker Wuling in a joint venture with General Motors and state-owned Saic, was China’s best-selling electric vehicle model in February.
Xiaomi enters an increasingly crowded field of automakers, from traditional global brands such as Volkswagen to Chinese start-ups including Nio, Xpeng and Li Auto, all of which are vying to corner China’s strategically important electric car market, the largest in the world.
Sales of battery-powered and hybrid vehicles in China hit record highs in December, nearing a tenth of the country’s entire automotive market. The Chinese government wants a fifth of all sales to be electric by 2025.
The potential for rapid growth over the next decade has attracted investors keen to find the Chinese carmaker most likely to take on industry leader Tesla, whose Model 3 was China’s best-selling electric car model in 2020.
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Demand from young Chinese consumers for technology-laden vehicles, as well as a low barrier for entry owing to traditional automakers such as Geely offering to provide battery and power-train manufacturing systems, has drawn technology groups to the sector.
“Chinese entrepreneurs track what Silicon Valley is doing; there’s envy, so for Xiaomi, which is really a rival to Apple, they see what they’re doing and say, we can be successful at this as well,” said Tu Le, founder of Sino Auto Insights, a consultancy.
But Tu noted that while Chinese search giant Baidu brought its AI and autonomous driving capabilities to its electric vehicle project, Xiaomi lacked the same competitive advantage. “They’re going to be pouring billions of billions of dollars into this to enter the most competitive auto market in the world,” he said.
Nian Liu contributed reporting from Beijing